Compensation as a Strategic Asset

CHAPTER 1WHY WE NEED A NEW COMPENSATION PARADIGM

“All significant breakthroughs are significant break-‘withs’ old ways of thinking.”

—Thomas Kuhn

If you are reading this book, you are likely only somewhat satisfied or even dissatisfied with your firm’s current owner compensation system and you are wondering how to make it better. Or perhaps you want to benchmark your current compensation system against firms that are known for their best practices. Whatever your reasons for reading this book, you can make your current compensation system more effective, and perhaps even fairer, than it is today.

While the world in which the professional works today is vastly different from the traditional environment during the first 90 years of the twentieth century, compensation systems have not changed much during the same period. Practicing in the twenty-first century poses significant challenges to accounting firm owners in the areas of leadership, management, risk vs. reward, recruitment and retention, succession, and compensation.

This chapter discusses paradigm shifts in the accounting profession and paradigm shifts in owner compensation.

PARADIGM SHIFTS IN THE ACCOUNTING PROFESSION

No one can predict the future with accuracy, but we know what has worked in the past often no longer suffices in the new world order of the twenty-first century. We base this statement on our observations of the public accounting profession for more than 25 years, and we recognize the following realities: